Question 1: What is the difference between fixed and floating exchange rates? Question 2: [fixed exchange rate] Using a graph explain that monetary policy is ineffective in influencing output and employment under a fixed exchange rate. Question 3: [fixed exchange rate] Using a graph explain that fiscal policy is effective in influencing output and employment under a fixed exchange rate. Question 4: [fixed exchange rate and DD-AA model] How can a government offset the effect of a temporary fall in world demand for home products? Explain your answer by using a graph. Question 5: What are the three desirable policy goals of a central bank? Using a triangle, show that a central bank can achieve only two of these goals at a time. Question 6: [Gold standard system 1870-1914] What is the Gold standard system of exchange rates? Using policy trilemma, explain what policy options were available to a central bank. Did the United states achieve internal and external balance in the gold standard? Question 7: [Bretton Woods system 1944-1973] What is the Bretton Woods system of exchange rates? Using policy trilemma, explain what policy options were available to a central bank. Why did the Bretton Woods system collapse in 1973? What were the new exchange rate systems after 1973? Question 8: What are the main elements in a central bank's balance sheet? Question 9: [Fixed exchange rates] Assume that peso is the home currency, and US dollar is the foreign currency. The exchange rate between peso and US dollar is fixed at 1. The following table show assets and liabilities of the home central bank. Assets Liabilities Reserves peso500 peso1000 Money supply Domestic credit Peso500 9.1 Draw a floating exchange rate line in the money supply, and domestic credit and reserve space. Then, draw the line representing the balance sheet of the above-mentioned central bank 9.2 (Fixed exchange rate and currency crisis) Assume that the home government borrows $100 from the home central bank in each period. Show how the home central bank tries to maintain the